Originally posted on Tuesday, December 3rd, 2013
Lehrman Institute founder and chairman Lewis E. Lehrman has an article in the current issue of The American Spectator entitled Bubbles for the Rich, Welfare for the Poor.
Lewis E. Lehrman Giving Closing Address at Cato Institute’s 31st Monetary Conference
It commences:
When government economists, academics, and the talking heads on bubblevision speak of “modest price inflation,” they know
full well that the effects of the quantitative easing policies that they have advocated and implemented have not been fully expressed in America’s consumer price index (CPI). Rather, the best evidence of runaway inflation can be found, among other areas, in the markets for commodities, foreign exchange, equities, bonds, farmland, real estate, and art.
Shortly after the publication of this article Reuters made several identical points in an article entitled What’s behind the spike in art sales: vanity, fear, and easy money. Reuters:
Emerging market billionaires, driven by vanity, easy money from the world’s central banks and a quest for safe investments, are taking the contemporary art market to new heights.
Art collectors made news for a second straight night on Wednesday as Sotheby’s (BID.N) held the biggest auction in its history, led by the record-setting $105 million paid for a work by Andy Warhol.
The previous day, hedge fund managers, oil princes and oligarchs were bidding by telephone at Christie’s when the auction house sold Francis Bacon’s “Three Studies of Lucian Freud” for a record $142.4 million, in what was seen as a test of the global art market’s health.
Jeffrey Gundlach, chief executive officer and chief investment officer at investment management firm DoubleLine and an avid art collector, said he has never seen a market like this one. He said the high-end art market is being driven by “a tiny fraction of the population in certain emerging economies” where people “don’t trust their currency and don’t trust the stability” of their economies.
While low inflation reigns in Europe and the United States alongside lackluster economic growth, many economists and others fear that years of “quantitative easing” by the U.S. Federal Reserve, in which the Fed has bought bonds to help stimulate the economy, will eventually trigger rapid price rises. And if not, the end of that easy money could trigger losses in conventional stock and bond markets.
For the world’s wealthiest, art is one of the more elegant in a small pool of safe haven investment options: It is tangible, transportable and resistant to inflation and conventional market turmoil.
Who is hurt by this? Apologists for “faith-based money” — Federal Reserve Notes founded merely on “the full faith and credit of the United States” — maintain a pretense that fiduciary management by elite civil servants is for the benefit of workers and the middle class. The data falsify this sanctimonious proposition, and decisively so.
Lehrman observes:
Like workers, businessmen, and consumers,
we must look at the real-world consequences,
bottoms up, not top down. Since the end of
convertibility in 1971, average real wages per
hour of work in the United States have been
stagnant. Average annual American economic
growth since 2000 has been about half the average
annual real growth of the previous two
American centuries. The real purchasing power
of a 1971 dollar saved in the bank, adjusted
by the CPI, has declined to a value of about
15 cents. That is to say, the price level has risen
from 1971 to 2013 by about six fold, a rise
unparalleled in the history of the American
Republic. American economic and political
world leadership is under siege. And so, too, is
the American middle class.
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